Cuba tries to keep the lights on

HAVANA, Cuba — With more than 115,000 barrels per day of Venezuelan oil flowing to this island, Cuba gets more than enough crude to cover its electricity needs.

But the government may not have enough cash to keep the lights on.

Top officials have ordered state-run companies to adopt “extreme measures” to save energy through the end of the year, shutting down non-essential production across the island in hopes of avoiding the chronic blackouts that afflicted the country in the 1990s, when the Soviet Union’s demise left Cuba in the dark.

"The energy situation we face is critical and if we do not adopt extreme measures we will have to revert to planned blackouts affecting the population," said a recently circulated memo from Cuba’s Council of Ministers directing state managers to keep air conditioners off indefinitely, and shut down refrigerators not needed for food or medicine.

Cuban officials have used the specter of rolling blackouts in the past to spur conservation efforts, but the most recent urgings are more than empty threats.

"Company directors will analyze the activities that will be stopped and others reduced, leaving only those that guarantee exports, substitution of imports and basic services for the population," read another memo distributed to Cuba’s light manufacturing sector.

Such warnings are especially unnerving to Cubans who endured the worst years of the post-Soviet era, which Fidel Castro euphemistically dubbed “The Special Period.” When Moscow’s generous oil shipments to the island abruptly ceased, public transportation virtually shut down and Cubans sweated through summer blackouts lasting 12 hours or more.

These days, Cuba has a new energy supplier in Caracas, and the Castro government’s deep political and commercial ties with Venezuelan President Hugo Chavez have led to billions in new investments for refining capacity upgrades and other oil infrastructure improvements.

Which prompts the question: If Cuba is receiving so much oil from Venezuela — and producing more than 50,000 barrels per day of heavy crude from domestic supplies — why is there an energy shortage?

The answer may be in Cuba’s other economic woes — and the island’s booming petroleum exports.

Last year Cuba generated $880 million in revenue from oil exports, making petroleum the island’s second-leading export after nickel, according to the Ministry of Foreign Trade.

Energy analysts believe the $880 million figure stems from sales of gasoline and jet fuel produced in Cuba using Venezuelan crude, as well as some exports of domestically produced crude to trading partners like China.

Venezuela’s petroleum shipments to Cuba increased 32 percent last year, as the island’s newly upgraded Cienfuegos refinery has become a processing center for Venezuelan oil bound for regional member states of the Chavez-led energy alliance, PetroCaribe.

Cuba is one of more than a dozen nations in the region that receive oil shipments on favorable credit terms as part of the PetroCaribe agreement. Cuba pays Venezuela back for some of the oil shipments by sending more than 30,000 doctors, nurses and other professionals to work in social programs created by the Chavez government.

But just as Cuba’s petroleum trade has soared, revenue is plummeting from other key exports like nickel, pharmaceuticals and tobacco products. Foreign trade is down 36 percent this year, as the global recession and $10 billion in damage from three 2008 hurricanes have drained Cuba’s finances.

Thus, analysts say, the more oil Cuba can save, the more it can sell abroad.

“I think it is actually a prudent effort on the part of the government that acknowledges the reality that Cuba is in dire need of hard currency,” said Jonathan Benjamin-Alvarado, a U.S. expert on Cuban energy at the University of Nebraska at Omaha.

“The extent to which they can conserve or curb consumption in order to reserve refined fuels for re-export is logical, but yet another hardship for the people,” he added.

Benjamin-Alvarado and other experts said Cuba’s biggest problem isn’t oil supplies but a decrepit energy infrastructure and a lack of power generation capacity.

“There aren’t enough power plants, and several of the plants they do have are in need of repairs,” said one foreign businessman who works in the energy sector on the island.

Cuba isn’t the only Latin American nation struggling with power shortages lately. Low rainfall has sapped hydroelectric capacity in Venezuela and Ecuador, while Brazil’s biggest cities went dark earlier this month when thunderstorms produced a colossal network crash.

Cuba’s problems, unfortunately, are of the man-made variety. As debts continue to mount and trade slips, energy rationing is likely to continue. And while blackouts are always a source of tension on the island, they’re far easier for the government to impose during the winter, when temperatures — and Cubans’ frustrations — tend to ease.

“People don’t mind when it’s cool, but on warm days they complain a lot,” said one Cuban woman who works in the office building of a state-run company. The only places in the building where air conditioning is still allowed are the rooms with equipment that can’t be allowed to overheat.

“They’re putting in lots of fans,” she said.